Inchoate

DEFINITION of 'Inchoate'

A state of activity or entitlement that is characterized by partial completion of an intended outcome or status.

The notion of inchoate comes into play most often in a legal sense, as it could refer to an inchoate transaction between two parties, where the tentative terms of an agreement have been discussed and it's plausible that the deal will go through, but no formal agreement has yet been signed.

BREAKING DOWN 'Inchoate'

The notion of inchoate rights or actions is an important distinction to make in certain situations. For example, an individual may have inchoate title to real estate owned by his or her parents, meaning that he or she will have clear title to the property once the parents pass away.

When applying for a bank loan, it would be critical for the bank manager to understand that the individual only had inchoate title to the property, not full title. Thus, if the bank manager issued a loan to the individual under the unclarified assumption that the bank could foreclose on the properties if the loan went into default, he or she would be in for an unpleasant surprise. This is because the individual would not actually have clear title to the properties, so the bank would have no claim against them.